Peter Agur Jr. is Chairman and Founder of VanAllen - a business aviation consultancy firm with... Read More
Boardroom - Benchmarking 1
The CEOs of two companies were attending a charity event. During a quiet moment one turned to the other and asked, “Tom, you’ve had a jet for years. We are in the process of getting our first one. My board is concerned about corporate headcount. How many pilots do I really need?”
This is NOT Benchmarking. Yet, you would be surprised how often these kinds of exchanges are given great credence and become the foundation for very important Business Aviation decisions.
Like all tools, benchmarking has its proper uses. Benchmarking is an excellent way to confirm that you are within the norm. For instance, most public institutions (utilities, universities, etc.) are focused on their responsibilities to the community. They want to be certain their use of Business Aviation does not exceed the norm. With that in mind, they often use benchmarking to compare themselves against peer organizations.
Used in this fashion, benchmarking determines pack performance. But, it does not confirm whether the pack is right or wrong. Even worse, pack performance does not create competitive advantage. In fact, if done incorrectly, your benchmarking efforts could misdirect you into courses of action or inaction that can harm the value and benefits you seek to gain from Business Aviation.
Your company’s strategic direction defines what and how you benchmark—not the other way around. For instance, assume you have one aircraft. Also assume, because of your core business and its strategic direction, one of your competitive differentiators is the company’s ability to respond immediately to customer service needs. Then, by definition, your aviation services are like a fire department; they must be ready to respond 24/7. This calls for staffing levels that enable such an objective. Benchmarking against the general population of single aircraft operators indicates you need only three pilots. But, your mandate for responsiveness requires four pilots, including the allowance for one pilot to also act as the flight department manager (365 days x 2 crewmembers divided by 210 operational duty days available per pilot, per year = 3.5 pilots).
The lesson is clear: you can benchmark critical criteria that drive the outcomes you intend. But, like all tools in your kit, you must use benchmarking properly.
How to Benchmark
If benchmarking is going to be valid and valuable, you want to be certain that particular factors are considered:
1. Benchmark against peers: The cardinal rule in benchmarking is to compare yourself to your peers. This sounds easy, but when it comes to the use of Business Aviation it is critical to ensure a true apples-to-apples group. That means the definition of peers goes beyond financial and operational comparisons. It includes a variety of additional elements of the business: cultural, organizational, ethical, philosophical and strategic direction are a few examples. If those facets of the business are not aligned within the peer group the picture you will get will be skewed, giving you information that can take you in the wrong direction.
2. Benchmark specific impactful policies: For instance, assuming you are benchmarking with true peer organizations, their responses to a series of questions about the policies surrounding the distribution of Business Aviation can be very insightful. Examples include:
- How many primary users are there per aircraft? As executive transportation tools, the benchmark norm is six authorizers per aircraft, and the range is one to hundreds.
- What executive level should have authorizing capability? The norm is the C-suite.
- What do you chargeback for Business Aviation services? The most common is Direct Costs only, with many other conventions used as alternatives.
3. Benchmarking practices can be a challenge: If you are trying to determine if your aviation services are employing Best Practices, benchmarking is not the best tool for several reasons. First, a corporate peer is not necessarily an aviation services peer. Second, your aviation services are unique. It is not practical to try to benchmark your practices as a whole. Instead, it is much more effective to benchmark specific practices. For instance, the use of contract pilots is a growing trend. Identifying practices that assure contract pilot performance as a flight deck member can be extremely helpful.
4. Benchmark data that are relevant and concisely defined: Asking other operators their Direct Operating Costs is too vague. The results of such a request will not be apples-to-apples. There is no accounting convention that defines what is included in aircraft fixed and variable costs of operation. On the other hand, asking what a peer company actually pays for fuel versus the advertised retail price, at home and away, is comparable across all operators.
5. Benchmarking variances from the norm can be extremely valuable: It is okay to stand out from the crowd, as long as the reason for doing so is well justified.
Throughout your life you have used benchmarking. You have probably used it most often to confirm pack performance. However, benchmarking creates even greater value when it points out specific performance and variances from the norm. After all, what you do uniquely is what gives you a competitive advantage.